In 2005, Thomas Friedman asserted that information and communication technologies (ICTs) had flattened the global playing field for businesses and individuals. The idea that the world is flat became extremely popular. However, this perception contrasts starkly with reality. The ICT landscape resembles mountains and molehills, with colossal giants dominating as smaller players struggle to compete. These giants, a few companies in a few countries, concentrate the production of almost all ICTs, establishing significant entry barriers for others. The highly concentrated global ICT market has become a battleground for strategic leveraging and geopolitics. This dominance challenges the notion of a flat world.

Semiconductor fabrication (fab) technology is the foundational technology that makes semiconductors, on which all ICTs run. Semiconductors have become ubiquitous thanks to doubling of transistors on a chip every two years. They are also a prime example of an uneven world. As transistors doubled, the complexity and the capital requirements of fabs increased exponentially, raising huge entry barriers. As the demand for semiconductors doubled, paradoxically the number of fab companies halved, leading to dominance by only a few.

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The 1996 Information Technology Agreement, which eliminated Custom duties on semiconductor imports, further concentrated the industry power, enabling a few corporations to produce and distribute miniature yet highly priced semiconductors globally. Presently, the industry landscape is shaped by stark concentration, exemplified by TSMC and Samsung controlling nearly 80 per cent of the advanced foundries worldwide. South Korea controls 75 per cent of  Dram memory chips and 50 per cent of NandFlash memory chips. The US, Japan and the Netherlands dominate nearly 90 per cent of semiconductor equipment production. China’s monopoly on over 80 per cent of rare earths production, crucial for semiconductor manufacturing, adds another layer to this skewed market structure. Not surprisingly, India’s efforts to set up a greenfield fab, for over a decade, did not succeed. Semiconductor technology has become the primary battleground for global technology supremacy between the US and China. The US imposed sanctions on tools required for advanced semiconductor manufacturing against China. China retaliated by restricting the export of rare earths essential for semiconductors. As these two giants wrestle, the geopolitical struggle is bound to impact the global semiconductor supply chain, as smaller players in the game do not have the capacity to substitute them.

The internet economy, the favoured child of ICTs, also exhibits pronounced market concentration. Network externalities further substantiate the Pareto principle. Chrome and Safari command 83 per cent of the global browser market, Google holds over 90 per cent of the search engine market, and Apple and Google jointly control 90 per cent of the mobile app store market. Amazon dominates with a 41 per cent market share in retail e-commerce. The three e-commerce technology platforms, WooCommerce, Squarespace and WooThemes, dominate with a 70 per cent market share. The world’s three largest social media platforms, WhatsApp, Facebook and Instagram , are owned by  one company, Meta. Apple and Gmail command 87 per cent of the email client market, while Zoom and Microsoft collectively control nearly 82 per cent of the video-conferencing solutions worldwide.

Each of these behemoths are valued greater than the gross domestic product of  most countries of the world. This gives these companies huge market power not only in their own country but worldwide. Such market concentration makes it near impossible for new players to enter. It enables manipulation of markets by the dominant players, exemplified by Microsoft bundling its operating system with Internet Explorer and Qualcomm making significant payments to Apple to exclusively use its baseband long term evolution chipsets in iPhones and iPads. Recent instances of Amazon leveraging advanced data analytics to sell its own brand products, short-changing sellers on its platform, and App stores are other examples that highlight the non-level playing field.

Artificial Intelligence (AI) has emerged as the latest powerhouse within the realm of ICTs. AI is further amplifying these disparities. AI breeds on data and its advancement is intricately tied to the availability of vast datasets — an arena where the dominant players of the internet economy — wield unmatched influence. The top five US internet giants — Alphabet, Apple, Meta, Microsoft, Amazon — possess colossal quantities of data. Chinese counterparts —Alibaba, Huawei, Tencent, Baidu — have also accumulated huge data piles. Google is estimated to have 10-15 exabytes of data. To put this in perspective, at India’s current rate of data consumption, it would take nearly 2,500 years to match the volume of data possessed by Google. It is impossible for other AI companies to compete with these data behemoths on a level-playing field. When Sam Altman, OpenAI’s CEO, suggested that India’s attempt to create a product similar to OpenAI is futile, he possibly had Microsoft’s massive data warehouses at the back of his mind.

Efforts by smaller players, the pygmies, have seen limited success, with China, and to some extent, India, being notable exceptions. China, recognising the evolving market structure, strategically acquired hundreds of old semiconductor fabs in the 1990s and 2000s. Supported by substantial government assistance, China now hosts companies like SMIC, which compete with semiconductor giants like Intel and TSMC. In the telecom sector, companies like Huawei and ZTE challenge Cisco, Qualcomm and Broadcom. China also foresaw the networked nature of the internet economy and established the Great Firewall, viz., the Golden Shield Project. Through  Domain Name System (DNS) filtering and Internet Protocol (IP) blocking, China blocked/restricted major internet apps — Google, YouTube, Facebook, WhatApp, Amazon —  and created its own giants,  Baidu, Youku, Weibo, WeChat and Alibaba. Unlike China, India’s Digital Public Infrastructure is a success story, not because of walls and protectionism, but one of innovative prowess to outcompete the ICT behemoths. Yet such triumphs are rare.

The writer is former defence secretary of India and distinguished visiting professor, IIT Kanpur